Due to the unpredictable nature of most people’s incomes, it is necessary to arm yourself with knowledge about the sequestration process in South Africa, to ensure that you will never fall victim to legal action because of non-payment on loans.

Most people, at some point in their lives, own several assets (like houses, cars and other goods) that are worth a lot of money. They will usually have had to take out loans to pay for their property and other items, and these loans will take some time to pay off. Unfortunately, it is impossible to predict your financial future. Your financial situation might be fine right now, but you cannot know for sure that you will be always be able to make your payments.

What could go wrong?

In today’s unpredictable business and economic world, people find themselves retrenched and without work all the time. Business owners find their businesses unsuccessful and workers find themselves un-hireable every day. If you or your partner had to suddenly lose or experience a significant drop in your income, would you be able to make your monthly loan payments as well as all your living expenses? Understanding the sequestration process in South Africa could save you from the very serious consequences of insolvency and debt.

What are your options?

There are several routes you could take if you find yourself in over your head with debt. The most important thing to remember is to always act immediately and try to resolve the situation rather than letting it build up and destroy you financially. Two options for dealing with out of control debt are debt review and sequestration.

What is debt review?

If you apply for the debt review process, a debt counsellor will assess your situation and negotiate with your creditors on your behalf. This will ensure that you will still have enough of your income to pay your essential living expenses while paying off your debt in manageable chunks.

What is sequestration?

If you are in over your head with debt, you can apply to have yourself declared insolvent by the High Court of South Africa. Your assets will then be surrendered, sold and distributed to your creditors in order to declare your debts written off. This will all be done in terms of the Insolvency Act.

How does it work?

Once you have applied for the sequestration process, your creditors will be informed of the application via letters and a notice in the Government Gazette. This will ensure that they cannot take any further legal action against you. Once you have signed the relevant documents in front of a Commissioner of Oaths, SARS and all your creditors will be given notice that your estate has been surrendered. You will have an advocate to represent you at your court hearing and if your case has been approved, a curator will handle all the financial matters for you.

Advantages of surrendering your estate

There are many advantages to applying for the sequestration process including but not limited to the following:

Your income will still be yours to control.

Only your creditors will be told about the sequestration application, so you can keep the matter private.

Because an attorney and curator will handle the process on your behalf, you do not have to attend any court hearings.

You will have peace of mind that your creditors will have to leave you alone in the future.

Having legal action taken against you for non-payment on your debts can be a frightening experience. You could have everything you own taken from you, you could lose your job in the process, you could have penalties put against you and you could be blacklisted. It is therefore essential to always try to keep control of what you owe, to never get in over your head with debt, to always choose financial service providers that are reputable, to never live beyond your means and to understand the options available to you if you are in financial trouble. Understanding the sequestration process in South Africa is essential for financial peace of mind.